beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

National Insurance Manual

Class 2 National Insurance contributions: payments: Direct Debit requested twice a year – effect on State Pension

Regulation 1(2), 4 and 7(1)(a) of the Social Security (Crediting and Treatment of Contributions and National Insurance Numbers) Regulations 2001 (SI 2001 No 769)

Providing NICs are paid by the due dates of 31 January and 31 July by those entitled to pay Class 2 NICs by Direct Debit (DD) (see NIM72300), the late payment and extra late provisions, which can affect a person’s entitlement to benefits, (see NIM72600), do not apply.

The payment for any periods in the second half of the contribution year, if not paid monthly by DD, are due to be collected in the July following the end of the contribution year. If a person pays monthly by DD they will pay for the periods in the last 4 months of the year from April to July after the end of the year in which Class 2 NICs liability arose.

Payment of Class 2 NICs after the end of the year in which liability arose, may impact on entitlement to the new State Pension (nSP). This is illustrated in the example below. If a person in this situation wants to pay the Class 2 NICs immediately after the end of the year for which they were due but before the due date of payment, they should be allowed to do so. But they should not pay in advance of a period of liability because that liability may not arise.

Example

Facts

Man reaches state pension age (SPa) on 10 June 2016.

Last tax year used for bSP is 2015 to 2016 (the tax year ended before the man’s SPa).

Man chooses to pay Class 2 NICs for the 2015 to 2016 contribution year twice a year, in January 2016 and July 2016.

The NICs paid in July 2016 get recorded on the National and PAYE Service (NPS) system shortly after they are paid but after the man reaches SPa.

Commentary

If the 2015 to 2016 year becomes a qualifying year for nSP when the Class 2 NICs due for the period in the second half of the contribution year are paid, paying those NICs in July 2016 may impact the man’s entitlement to nSP from SPa. Once the NICs collected in July 2016 are recorded on his NPS account, assuming they are collected by that due date, the man’s nSP should be recalculated and any arrears paid.

The payment request for the NICs due for the second half of the 2015 to 2016 contribution year will be issued in April 2016. The man could choose to wait until 31 July 2016 to pay for the NICs or he may wish to pay as soon as he gets the payment request.